Schwab has a reputation in the securities industry for taking legal action against brokers and the firms that hire them, said Thomas Lewis, a lawyer in Lawrenceville, New Jersey who advises brokers about moving between firms. The cases typically arise against brokers who take clients' contact information or send out announcements about their affiliation with new firms, said Lewis, who was not involved in the case.
Schwab can use that strategy because it does not participate in an industry agreement intended to minimize legal disputes when brokers switch firms, known as the Protocol for Broker Recruiting, Lewis said.
The agreement allows brokers to bring very limited information when switching firms, but only if both firms involved in the transition participate. Details typically include client names, telephone numbers and email addresses.
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Schwab, last month, filed a lawsuit in a Seattle federal court against former Schwab adviser Christopher Canorro and the firm he started in May, Basilica Wealth Management in Bainbridge Island, Washington. Canorro, whose firm employs two other former Schwab advisers, breached contracts with Schwab, in part, by taking confidential client information, Schwab said in its complaint.
"Schwab's claim is a strategy of intimidation designed to protect its parochial business model at the expense of fair competition," said Clinton Marrs, Canorro's lawyer in Albuquerque, New Mexico. "There are no merits and we are confident that the court will agree."